# Appendix — Securities & Exchange Commission v. National Securities, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1969
- **Citation:** 393 U.S. 453

## Text

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APPENDIX =o ihe = 63 gt
United States Court of Appeals fo ri sahiaon

osaretiegst 247)

ST tis 7

okt ihe oy No. 21,146 [November 4, 1967) ai
Ee Sscommme 40, Froranar Cems, ems .
uv. e824 . it S58 psihye zit

‘Nosieis Szourrries, ING.,:\A CORPORATION; ‘Nadiowar,
Lire & Casuauty InsvRANCE COMPANY, “A OORPORA-
TION; Ropert H. Watxace; Roserr C. ‘BowAnnan, :
“JR. ; ‘ARTHUR W. SAFFERT; ‘Tap Wirxins: Jonx'S. eee
BARRert: JosePH B: ‘SETTER; “Brtererd W. ‘LARGE,
IR. ; RrcHaRD G. JOHNSON; ‘ERNest A.” Rrowanne;
Wituam A? ‘REevy; Bonn B.. Brsaey j PRopucers
Lire INSURANCE Company, a “CORPORATHON ¢ ‘AND Pro-
pucers Tuer & Loan ‘Compan, a OORPORATION

APPELLEES , Be gis aor

On heen from the United ‘States District Court for :

site District of Arizona —

:; Before Jzarpera and MERRILL, Girowih audes, and
TatLor, District Judge... .:)
-. Jgprpere, Circuit Judge: ‘Before us is an. appeal
under 28° U.S.C. § 1291 -by: the plantiff below. and
| appellant in this courf, and Exchange Com- :
i mission, from a final judgment. of. the Aimy ee
District Court. for: the District of. Ariz

-@45

a
—- etige-- ~

Saction 2le of the Sooutities and . ecshainon Act ot. |

1984, 15 U.S.C. 78u(e}, to enjoin violations of the anti-
-” fraud provisions of that Act. Sec. 10(b), 15 U.S.C. .

_ 78j(b), and Rule 10) 5 of that Act, 17 CFR 240. 10b-5,

ma ater fie eee i aay the pe of two stock

~. Jife insurance companies on the ground that the proxy
'. . solicitation material mailed to the stockholders of the

two firms contained positive misrepresentation of ma-.
- te¥ial-'fadts, 4214'aldo failed to state” material facts
necessary to make the statements therein not mislead-
ing in. ight of. ‘the, circumstances under which Sher
were made. .

Appellee National Becurities, Ine. is a Colorado cor-
| poration doing business in Arizona as a holding eom-
- pany ‘owning a controlling interest.in the stock, of
National-Life & Casualty Insurarice Company, an Ari-;
-gona,conporation, Appellees; Wallace; Bohannan,
- Saffext, Wilkins,. Barrett, Setter and. Large.are officers

of the appellegs National Securities, National Life, or ~
‘another subsidiary of National Securities... - .
Appellee Producers Life Insurance Company i is an _
Arizona corporation which conducts ‘a life insurance -
“business in Arizona\and other western states.

As of April 27, 1964, Producers Life had approxi-

mately 14,000 stockholders ‘with 880,000 shares. of

common stock issued and outstanding, © ant S.: .

were owned diteetl} Weems peg Ot at

at eS er

: this litigation’ us in tolling theetote:t the ling
‘directors, together with..J. Grant ‘Everson, Jess Ei:

’ Hunter, and John J. Falgoné?; made-tip Prodweatt

Life’s ‘hoard of -ditectars. Hn addition,-the sling
‘directors ‘other than Baca hae es phenies for, be

. about 565,000 shares. >

-. The amended and supplemental. doinplaint: in 2

‘stance alleges that.since March 15,'1964, appellees
and the selling difeetors have made /uschof. means:and

instrumentalities in interstate cohimeree'andithe mails |
to advance a scheme by manipulative and deceptive _

devices’ in ‘connection withthe purchase and sale’ of
- stock in Producers Life and National Life to defraud

Producers Life and its stockholders by making ‘false
and misleading statements, and that since that date ©
appellees have effected various arrangements. with the

ultimate. purpose of merging Producers Life with . |

National Life in derogation” of the rights of Pro- ~
ducers Life’s ‘stockholders, and contrary to the
fiduciary responsibilities of the selling directors and
appelleés . Wallace, Saffert, dere Barrett, and

' Large.

The complaint: -sets forth in detail the various acts,
transactions and oceurrences which transpired, lead-
ing up to the consolidation agreement. of November

_- 27, 1964, between National Life and Produeers Life: -o

The agreement provided for the submission of the —
agreement to the stockholders of Producers Life and
N ational Life... |
. - Beginning in August, 1964, appellees: Neltional Se-

, Gustto National Life, Bohannan, Wallaee, Saffert,

Thay, along’ with’ Prodacets ‘Tit, & Loe Company, are
not how parties to the action, thi suit as to them having

‘been. dismiisyetl ..without preju Se NL HS, TE 1, 2 é

. nt’s motion, ‘to’ frtiertd its’ Amierided. ‘so ,
ificlnde them ‘having beet denibd gn’ Februnty es ws

Cf Sadie Medes arte

; om
; Wilkins, Barreth Setter and Large conducted a proxy

solicitation. campaign ‘by mailing communications to.

Produceté- Life's 14,000 ‘stockholders throughout the -
.. United States. It is the alleged’ ‘material misstate-
- ments andthe allegéd omission of. material facts in j
_. these proxy solicitation. Jcommonnhontiont be which
ss appellant complains, \
af The complaint then alleges, in detail, m numerous mis-
statociennts dn enriidelons of tnatesia} tacts.
‘A special stockholders’ meeting was. held: ‘on April
19, or 26, 1965,:atwhich the: shareholders ‘approved
and tonfirmed the merger. ,
- (Phe complaint further alleges that following the
stockholders meeting, the appellees sent false and mis-

oe statements to the shareholders of Producers
Life.’ ‘is further alleged that the consolidation agree-
ment is void as an essential element of a fraudulent

scheme and because it had never been validly approved

ee eee ae et ee
‘It appears that the merger agreement was submitted
to the Arizona Director of Insurance on May 7, 1965,
“end: approved’ by him on July 9, 1965. It further ap-
‘pears that since that time:the National Group has con-
' .. ducted the affairs of National Life and Producers Life
as a single operation. © . :
in the court below, appellant prayed tor the foilow- :

gl hi rd cen ya

1 at

Sas ae Some me
| just and equitable: J .
On September 1, 1965, appellees filed a motion me
for judgment on the pleadings. or, in the,alternative, -
for summary judgment, The district court’ granting .
the motion for summary’ ap RE on hag Pleadings,’
stated inter alia: rah
mh ‘Bren if it be amumed tat § 10 b). would -
otherwise be ap licable to ~prox ions
| eae omitted], and poll gp yolder-ap-
‘proved corporate te consolidation and reorgani-
zation is a. ‘purchase or sale’ .of securities —
within. the, speening: ¢ “al ae. b) and Rule 10b-5 .
[citations omitted], th ‘remains
tion of whether the McCarran Act [59, Stat.
15 U.S.C. §$§ 1011-1015] does not preclude

! ths application in this. case of: $10(@),. as im- _

; 8.8 U0, {AOR ala part:
ae * , in
oh Ne Act sof i ETOSS « g Dersomatened “to,

-

ae ini ARS. 320.7, which. reads as
tre. “iO toy ihe oegit petal. 14 .
) ~ "a ge NAL A: | ciel: podtert af kind
may mergeor, Consolidate with x of any ‘kind
ste te foreign, stock iaiieoer by complying with
the provisions of ‘gereral law g the.
ee or. consolidation of. -eorporations —
, formed for profity, but p wabject: to’ subsection B
08, section. » -

this.
8B. No-sach merger or consolidation shall
be effected. unless in advance thereof the plan
and agreement théréfor have been filed’ with -
and approved in writi the director of in-
surance. The director give his’approval
[within 6 Tonsopable tne after fling. nless he :

to the. stockholders of any
‘domestic inacteet involved. ,
- 3. Would substantially reduce the security
_of the service to be rendered to pelicyholders
Ma
vi where.’
N _ 10, Arizona, law farther provides for an >
3 tothe State courts from a decision of
oe r of Insurance ‘made under the a

is ¥ ; o) of A.R.S. § 20-731 [see ARS. §§ 20-
ae 1l. Made: the remedies which the Securi-

Commission may seek jn this
whi s3@) of. the 1934 Act, ©

ties and Ex

Sit, 3 7. may

Res ‘court
>i O° ftates :
up fey ar ther ie met tn

A _eretion, institute: ‘the. nécessa oP vs
Mon el at" Phe fe xo Ho, vast ses “sh ms

| of of th

ee ovisions cra pe meaning 5 Ne,
C.§1012(b)}; *
‘Appellant speeiben that the site acca

1. (IJ: granting defendants’ [appellece’] mo--

ry ition. for: ti pio the
‘ground tha Juda rede may “ Pe bibiatieend ti tnpeldewpashinen
ne ee ee ea

¢ sbtit
i ‘dtiw gait Jeamo> uoiithegs! bataube attoxts to sisie sdf
ABLE z £3 : 1 with. 49%). .2f noitibs oO

——oSoeoo = -—— ——— ee ey ———

i 76 eee ay 9 © > paar
Beeb a ® 16a es 2

Re : fhe Cominities Report indicates the ostitimued sclic-
‘tude of the Congress for state! regulation: of the in-
ee ee practices, selted to insur-.,
. @hee-stoeks. . o+-/ metas ot to sititye ore iy
OT We are: oot ren te 6 views exprisced by the

“Gis ne ey
aed bd T yh rn

eaters

pro
aft fi; pt

, 23 4@0 AWS

itt purpose.
a lt hy BRA s ns

ae. may: Pig «
c. ay 3 she sarees ar

‘The jadgment Ned fre ished

ron guieitiaat olt bobo at

Uiited ‘States Court of Appeals for the Ninth Cireuit

7 “Gee ‘AND_ pneu "scatman, APPELLANT
- joiet MATIONAL, Saourrmies; Ivo., xr Alay, APPELLEES:
~ SPMESAT TTT es i Sa n igde vo
‘1G: Appeal. from .the, United States; Distriet Court for
he District of: Arizona. 41a #ig SHoltifirs:
Bit a Aeon came on tobe heard-on: the’ ‘Transcript of

Solera 1 att Ato Asedser fii
ition’ im respect of. securities. iemued-by ouch: company and
: sie por eetony tar tom beg?! nn st id a Na-

The art of ite siioiel lecteletion easing with euch |
conditions. Ste Aris. Rov. Stat.’ § 20-148.
a

the Record from the Unitéd States District Court
for the District -of eae 2 was duly submitted.

On ‘consideration. is now here ordered
and adjudged by this ‘Co eal the judgment ofthe
anid Ditriet Court; in: this Denpac bes sem8 berets %

ee rs ‘and entered Ne ov. 4s 1967.

ef : ,
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‘Unltd States. Distetet Court, District of Aritona
| @

Gv No. 466 Phx.

pees AND EXCHANGE Oonnmas, PLAINTIFE
a
Nationa Saoenera, INO. A CORPORATION, Nation at
Lire & Casvanty Insunanon OCoMPANY, A CORPORA-
TION, Rosser H. Watiacs, Roszrr 0. Boxannay,

i Jn, Aproon W. Sarrant, Tep Witxins, Joxun S..

Barearr, Joenpx B. Surran, Bremren W. LARGE,

: Je. and Propvcsrs Lirz Insurnancp Company, A
CORPORATION (ALSO KNOWN fof gach ~*~
ay: tie Baar pnd,.,¢hat,, le, ;
lstobe ; {*

-- caitivupeidgral the & re

' panies. involyed. has, never. -been registered on any
national seeurities. exchange; |.

. - ~~ ‘ .
110 ; on 7
. > : 2 ~

° x bai 4 j
—

0". oOnitit:

oT ti the jsubordigatinn. “6
(c-(cotber ganitieg | of,

ail | | Of the" defendiitite! Anode GFF 16 etn Q12 :
‘That the! Gormission may Jhave: ‘all! farther
\omelief. that the Opurt may..deem.just, equitable, |
canes end necessary in the circumstances ;,... ,
itis Daastaete ‘eon plained: of ». would ~ fall: ‘eéithiixi. the
prohibitions ofthe proxy-solicitetion-anti-fraud : pro-
vision of § 14-of the 1934 Act :[15:0.8.C: § 78n}, as
implemented: by Rule 14-9 {17. CFR: 240:14a-Q], but
for the fact that the stock-of the insurance; com-

H% ~~ until sometime during oo will a i rei

aoe a hie al : 11200)
3 Sein wing: ©

-h1qn “paion to the -jutrinfiotionsalithe Bemmibieet and
c |

cy. (Sixebapge Commission in,
ner vol of, the - a

“74641 baheh Gan Me ’

10 Oia et iot , > oft
is. : & he left tothe States: [House Report
ropes No. '1438; May’ 19;:'19647:196% U.8i ode Cong.,
iat ereigricn ; 3022}; © icte ghileenes Tc -

ven if it be ‘assumed | a S1o(b) 5 would other- }

pe. ‘beunetedie Joy. Proxy, soligitations: [but see
Borak:‘v. ‘51. Case:Oo., unreported: in’ the:

Court, 317 F.2d 838, 846-947 (‘7th Cir. 1968), ‘aff’d on
_ Other | grourids, sib rom. J. I. Case Co: v. Borak, 377
U.S. 426, 84 S.Ct,/1555, 12 L.Ed2d 423 (1964)], and

that a shareholder-approved corporate . consglidation |

and reorganization is a ‘‘purthase or, gale” of securi-

‘ties within thé! meaning of § 10(b);and! Role 10b-5

[compare og LL. Green’ '@o: vi: ‘Childree, 185°. F.Supp.
95 (SDN, 1960), and Voege' V?. American’ ‘Sumatra
Tobacco “Chip... 241 F. Supp. 369 (D (D,Dela.1965), with
National Supply Co. v. Telend Stanford Jr. University,
184 F.2d 689 (9th Cir. 1943); and Sawyer v. Pioneer
Mill Co., 190 F.Supp. 21 (D.Hawaii 1960), remanded
300 F.2d 200 (9th Cir. 1962), cert. dem, 371: U8.
814, 83 S.Ct. 24, 9 L.Ed.2d 55 (1962)], there still re-
-Inains the question of ‘whether the McCarran Act [59
Stat. 33, 15. U.S.C: §§ 1011-1015] does not preclude
the application i in this. case of § 10(6), as a
8° Rule 10b-5 ;. Ae
8. 15 US. C. §1012(b) states, ‘in party”

No Met. of, gh

Ry. any Btate, ‘tort urpose OF of-regulayine the |
Bafa, pig essed se

3 mpiniey 15
9, The tawiof Arivotia” requires that tlist ‘amy’ proposed —
pai (Gf Btowk iikertFeintd companies ve maeatied to

Ahh ss pepe » of} insurance '

-

f rime, : a

Eye eS
aetna
te y

fit “nite Staion iin a it i

petty Aen BOM: St i om : fag i

bs aif t Conmaise der sh Hi; ,
Be i:

hs creme. . 4, ar e

hig my $s s

te ea ay 8 ie ce sue i; 0: Lee Recta Minas
ae of : the ASKS oh PAAInDIE' edt

hers torn :
; ovine ra Loos

[2] a9One Be agar el mt = s
| plemenéal Camplaia}st bar, if bea ene | meee? are

againdt’ fituiws violations: of “6 10¢ =
suid four vation of $2000) HE AS |
’ of the cofporate merger, now finally appfoved by. the:
‘Arizona Djreetor of Insurance pursuant to: ARS. .
~ §20-731,.would at least’‘‘impair”;:if not “invalidate”
_ or “supercede’’, laws énacted by'the State of Arizona.
' ‘for the: purposé of regulating the business of insur-.
arice”’, within the meaning of the applicable provisions
of the McCarran ‘Act [15 U.S.C. §.1012(b)}; and . .
[8] --13.. Finally, plaintiff’s. , ’ for relief als *—-
; legedly “necessary to rectify-and correct the conse--
ome onwtien aedeeitropstelbor
defendants”, includes a prayer for an : ee gun
unjust enrichment end other relief, which rouge 3
“Gs0 ( )5

Se ‘inappropriate. (cf. Note, pa
.. abe see; IIL Loss, “Securities Regulation 1824-1829"

(2nd Ed. 1961)+@ary, Book Review, % Harvi.Rev.
857, 861°(1962) “open oer fall boi.
Se cepa ok erothahas Pitot : ir SATte) of he

c 1984 Act [15 U.S.C. $ 78u(e)]5_
Accordingly, it is. ordered ° ‘detendants’ motion
aie for jelgvasst on tha platings beaoribeipaaied 7
It is further orderéd that ‘defendants serve and
Todge with the Clerk of the: Court withit: tet days

-
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. Ca bitipar fsisty ot EME ‘nie bs Seenpiering Terie,

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‘sie A PEBHeCT Herta Hose ets : { ‘raer Lot Bll

ott 3 ta (a)ie Qt fabivorg fers: ofdslinvs Hotere ie
; abbots ‘oben: taal hoashso ai Sit “rh at tr ve or eee : a

“fine ongea: edaobnetshr:

ote Kins od Senior United States Diseriet Judge? ee A
: eid heats VOT! Ifeei ee epi po i: Pa tras Sth: ry Pad nin 7

te POLI BION? OTs fad tiie

i to * yi fen Petes: ij port ‘eld st yitie ‘s

Fri 5 bid 4 iord Nobahils: ae
dps TOLIG E> zeae Nien spate ghicitetsoo orl ave d
— Piatt RE gh PRRs ag OER SAE

a ee St - Disses aU he sacra] tom Foiisiih Bross Te

“ate bil ovenk’s Seen bes “ortnefeet’* tanal-te btr Doan
ihe oth to stn geht tet rae: ys is i — tS Bygep att tint

. f,

aed

>} = June. 1996, known as the. BchinecnsPatman °
| June 19, 1996, non Act, shall net ytothe |
-basinegs of ineuranen oF t ‘eaabioe econduct .. |
iy ta a ae 1 ey me @

“ KOR :

_ tated :
<< sSthaee ion): a |

age lates oF fa ecuritdes, { ee |

ad ta 36 AG pov peti is Sa

~ parts! - sees Hs sare Sif}. paeen:

; Hs i Fe } ) all be oll bab ‘= ey ly =.

tly, by. the -use. or aay tieane 0 a; a
entaltty of interstate, commerce. or of Se

sts

— +

mails or of any facility of any national Souri- :

jee ie suchenes ee
a | por gg " joy any device, scheme, or artifice |
ui

: (b) to make any any untrue statement of a ma- oe

terial fact or to omit to state a material fact .—
“necessary: in order. to to make the statements .
made, in the’ light of the éircumstances’ under ne
NG) to angage in nyc Drain 0 eae ee
engage in any: or course |
eae soainess which operates or would operate As ie

a oat of aout any. person, |
in connection with He purchase or sale of aig

Pee sites cena * Me es

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0054%3A03. Public record. Not legal advice.